Advances in Social Science, Education and Humanities Research, volume 351

4th International Conference on Modern Management, Education Technology and Social Science (MMETSS 2019)

Schweikart's "Economic Democracy" Management Model and Its

Enlightenment

Junfeng Xu
Shanghai University of Political Science and Law, Shanghai, China
fengjx1971@163.com

Keywords: David Schweickart, economic democracy, enterprise management, enlightenment

Abstract. David Schweickart, a professor of philosophy department in Loyola University, Chicago,

USA, is a famous left-wing economist. In his exploring about where the future society will go, he
proposed a pioneering "economic democracy" management model which based on criticism and
reflection on traditional "planned economy" model and "market economy" model’s practice
experience by Yugoslavia, Japan, Spain, etc to construct itself with the market economy as the
leading factor, workers’ self-management enterprise as the kernel, social supervision and
macro-control for security management. This enlightens us that when market plays a decisive role,
we must handle the relationship between government and market, market and enterprise, sharing
"labor process" and sharing "labor products" to standard employees' democratic participation in
enterprise management to realize economic development’s new leap broadening Shared
development’s scope.

1. Introduction
David Schweickart, a professor in the philosophy department in loyola university, Chicago, USA.,
wrote the famous books with "capitalism’s or workers’ control? A moral and economic evaluation
(1980),"market socialism -- an argument between the socialism" (1998) and other works. His
representative theory achievement is "Economic Democracy" management mode with market
economic system’s dominant role and the workers’ democratic participation in enterprise
management to realize enterprise’s profit maximization and workers’ equal income distribution,
sharing "labor products " and "labor process". Therefore, it is very important to study Schweickart's
"Economic Democracy" management mode.

2. "Economic Democracy" Management Mode’s Theoretical Origin

2.1 Theoretical criticism and reflection about "planned economy model"

The "Economic Democracy" management mode is a direct product from theoretical criticism on
"planned economy model", which mainly focuses on four aspects: "information problem, incentive
mechanism problem, centralization tendency problem and enterprise innovation problem ". [1]
Schweickart pointed out that Information plays a vital role for the planners, the plan’s undertakers,
consumers. If information is improper or insufficient, the three parts’ vital interests will be directly
affected which will have a fatal impact on economic development. If the planners cannot obtain
enough information, they cannot make reasonable plans which will affect production, consumption
and distribution. If the plan’s executors lack enough information, the disconnection between the
production and operation will appear in the enterprise with the irrational, disordered and ineffective
production, which will lead to products’ surplus or shortage. If consumers cannot obtain correct
information, they will have irrational, wasteful and excessive consumption which in turn will affect
production. He said that planned economy is subject to administrative command constraints, and
enterprises must carry out production and operation in strict accordance with the government's plans.
Enterprises do not have independent management rights whose activities are led by the government's
planning and instructions, lacking due vitality and initiative. Enterprises also do not need to consider

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the operation effect, profit or loss and rely heavily on the government with "father and son"
relationship for soft budget constraints. The special administrative subordination relations between
government and enterprise could easily lead to "centralization tendency" including political
centralization, economic dictatorship, political problems such as corruption, bribery. Since all the
production and business operation activities are from the planners, there is no evolution and
efficiency for enterprises, also "no new products or new technology in the economy found", naturally
no effort to carry out the innovation with the "structure" reason. [2]
2.2 Practice Reference from "Market Economy Model"
2.2.1 " worker’s autonomous market economy Model " in Yugoslavia. In the 1950s, Yugoslavia began
with the reform through "workers’ autonomy" and "market economy" to construct the "autonomous
economic model" " autonomous political model " " autonomous social model" leading to
Yugoslavia's economic development, which made Schweickart call it "the most liberal communist
country", and interpret the "economic and democracy" management mode to be "Economic
Democracy" as "workers’ management market socialism". But the Yugoslavia reform had obvious
failures, such as national economic function abolition, political function abolition, cultural function
abolition leading to collapse. In designing "Economic Democracy" management model, Schweickart
clearly emphasized the national macro-management system and social supervision system.
2.2.2 Japanese "state intervention and workers lifetime employment guarantee " model. As we all
know, Japanese economy is one of the fastest growing countries after the second world war with the
growing by 55 times from 1946 to 1976. Schweickart pointed out that Japanese economy features
included "massive state intervention", "dual economic mechanism, one half is a competitive
enterprise groups, the other half is thousands of small companies" " a lifetime job security for factory
employees", etc. Therefore, Schweickart made “economic democracy" management mode mainly
retain the advantages with "employee protection mechanism", "macro-control" and "market
economy", and criticized Japanese government's capital investment management.
2.2.3 "Mondragon" workers' cooperative Model in Spain. Schweickart’s another reference is Spain's
Mondragon group, a workers co-operative beginning as a group run by the red Abbe, Arismend, for
working-class boys who were too poor to go to university. In the 1980s, Mondragon group had more
than 180 cooperatives, which increased a number of workers and achieved great success in
construction, education, social security, research institutions and other fields. Schweichart
appreciated the democratic cooperative nature that it had equal economic and democratic rights,
workers’ running enterprise independently and participating in the income distribution equally. At the
same time, he also realized the problems such as the investment capital shortage and the reproduction
expansion limitation, and designed the bank-centered investment distribution mode.

3. "Economic Democracy" Management Mode’s Characteristics

3.1 Workers' Democratic Participation in Enterprise Management

This is "economic democracy model’s" core which focuses on stimulating workers' labor enthusiasm
so as to maximize enterprise profits and rationalize income distribution. The enterprise’s major
affairs must be decided by "one man and one vote" including production, sale, distribution, and other
major issues to protect the workers’ self-management equal division. The enterprise’s managers must
be elected by the workers by votes, and the workers have right to remove those management members
who cannot carry out the workers’ will. The enterprise’s production is social ownership form, not
private ownership form which is a new individual ownership form with the results that "enterprise
property belongs to the society collective property, and workers cannot own the production
ownership means ", [3] laying a solid foundation for workers to obtain the equal income in the
enterprise.

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3.2 Market Economy Playing a Leading Role

This is the basic economic system that "Economic Democracy" management mode depend on, that is,
market economy system can play the main regulating function, at least to ensure the decisive
adjustment in terms of consumer goods and capital allocation, for "market has many attractive
characteristics that it can actively promote rather than hinder socialist objectives’ achievement by
making the income, wealth and opportunity properly distributed". [4] Schweickart put forward that
enterprises must carry out activities as independent market subjects with independent operation and
self-financing. Enterprises have independent production right, what to produce, how to produce, and
so on, must be decided by enterprises according to market conditions. Enterprises generally can make
prices about the raw materials they buy and commodities they sell. At the same time, it is necessary to
play state’s macro-control function on the market under special conditions such as market failure.
3.3 Society’s Macro-control and Supervision Function on the Market
This is "Economic Democracy" management mode’s guarantee system. Schweickart is very
concerned about the state’s macro-control role especially in the enterprises investment, by social
supervision with the state, local governments and community-level organizations. In order to
overcome insufficient capital investment and disordered distribution, Schweickart emphasized state’s
macro-control function by economic means. He envisioned that new investment must depend on a
central property tax to break through the traditional funds shortage caused by private investment. On
the funds investment in enterprise distribution, David schweickart suggested to set up cooperative
Banks similar to "Mondragon" type, through which the central government transfers the collected
funds to the bank through community, the bank put the funds allocated to the enterprise, if the
enterprise can not invest in accordance with the requirements, the bank shall have the right to return
the money to invest in a business having security investment. In addition, in order to ensure state
public expenditure and special projects, the national legislature shall have the right to reserve funds
for basic facilities development, public welfare undertakings and special projects. The remaining
funds would be redistributed to states and provinces in proportion to their population with regional
legislatures making the same public spending and incentive project funds; the rest is redistributed to
communities which also allocate funds based on local public spending and incentive projects.

4. "Economic Democracy" Management Mode’s Enlightenment

4.1 Handling the Relationship between Government and Market Properly

Handling the relationship between government and market is a difficult problem facing all market
economy countries in the world, which is also Chinese economic development’s top priority. At
present, China has entered a critical period to make "the market a decisive role" which has a profound
impact on people’s material world and spiritual world. But Market economy itself has natural defects
such as fittest survival, hysteresis, market failure, improper competition, etc. If the government's
macro-control function is not fully played, the market’s natural nature is bound to burst out and
generate a series of problems, such as moral decline, environmental pollution, financial charges and
other contradictions, thus causing other problems. And if the government interferes market economy
too much, the market economy’s dominant attributes will be inevitably affected. The state's
intervention in economy should be reflected in such fields as "social welfare projects" "special
sectors" "construct public welfare undertakings" "incomplete market compensation", [5] so as to
make up for market shortage and regulate market economy. Schweickart's "Economic Democracy"
management model enlightens us that we should give market decisive role, make full use of the
market's allocation function in resources, accumulate more material wealth, and make economy
re-take-off of. At the same time, we must recognize that the market is not decisive in all fields, the
government must play a decisive role in income distribution system, macroeconomic policies, major
infrastructure construction, special projects, public service system construction in areas such as

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function. We must have the whole society’s supervision role especially by the grass-roots people and
organizations to ensure the social resources and market resources used rationally.
4.2 Handling the relationship between enterprises and market Properly
In the market’s decisive role background, the enterprises should be independent bodies to bear the
production, distribution, exchange and consumption, service, and other functions, but the enterprise’s
capabilities can not leave secure market, mature market rules, more market factors. Therefore, we
must pay more attention to the relationship between market and enterprises. At present, Chinese
economic development has entered a particular stage with urban back-feeding rural, state-owned
enterprises, private enterprises, foreign-funded enterprises, joint ventures already constituting a
market main body, such as primary industry, secondary industry and tertiary industry being in
enterprise main body form into the market economy development pattern. Schweickart's "Economic
Democracy" management model enlightens us that enterprises must be regarded as independent
economic entities, given more autonomy to realize independent operation, self-financing, and
fundamentally eliminate enterprise activities limitation. We will continue to intensify reform and
policy orientation in state-owned, private and foreign-funded enterprises, allow all enterprises to
participate in market economy so as to create a fair, efficient, harmonious market environment.
4.3 Handling the relationship between sharing "labor process" and sharing "labor products"
Shared development is the unity between Sharing "labor process" and Sharing "labor products ".
Among them, sharing "labor process" is the foundation, which is workers’ participation in labor
activities, sharing "labor products " is the result which is the direct expression for the workers’
participation in labor. At present, China is generally concerned about sharing "labor results", ignoring
sharing "labor process". Employees are only concerned about sharing reform achievements, and are
not willing to pay too much labor or take the initiative to pay labor, lack of enthusiasm, creativity,
social responsibility, etc. Schweickart's "Economic and Democracy” management mode enlightens
us that we should pay more attention to the workers’ participation in the activities in all kinds of
initiative, enthusiasm and creativity through system specification and spiritual education to
standardize the worker participation in labor, improve the labor outcomes associated with labor pay
system, strengthen workers to participate in the social construction in democratic system construction,
etc., to experience labor pleasure to create happiness, sharing the effect of" labor process ".

5. Conclusion
In “Economic and Democracy” management mode, Schweickart imagined the democratic principles
to encourage workers to participate in enterprise management practice starting from market economy
dominating, which can guarantee enterprise to promote production efficiency providing abundant
material wealth for shared development, and inspire staff to participate in enterprise labor interests in
Shared labor process to supply direction for exploring Shared development.

Acknowledgement
This research was financially supported by the National Social Science Foundation of China (Grant
NO. 17BKS017).

References
[1] Bert Allman, market socialism: the debate between socialists, translated by Duan ZhongQiao,
Xinhua Press, pp 9,2000.
[2] Bert Allman, market socialism: the debate between socialists, translated by Duan ZhongQiao,
Xinhua Press, pp 11,2000.

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[3] Xu Junfeng, Exploration on the compatibility model of socialism and market economy, Shanghai
academy of social sciences press, pp 75, 2012.
[4] Saul Estrin, Julian le grand: market socialism, economic daily press, pp11, 1993.
[5] John Romer, the future of socialism, Chongqing publishing house, pp 86-87, 2009.

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